In my humble opinion....

Companies have their distinct revenue recognition policies and, in the M&A space this can present quite a challenge especially if they are in different jurisdictions. Aligning their individual revenue recognition policies can prove to be a time-consuming task. This will require a thorough understanding of the companies’ practices, applicable accounting standards and local laws; and can be a tight rope to walk since any change in revenue recognition impacts financial metrics and can make it challenging for stakeholders to compare performance – historical and post-merger. IASB’s (International accounting standard board) international accounting standards and it adoption by an increasing number of accounting boards has been pivotal in enhancing comparability and reliability of financial statements across different jurisdictions. However, the impact of local best practices and laws may need to be determined. Revenue recognition is an accounting principle which defines when and how a bu...

Five step model for revenue recognition: (Reference taken from: INDAS115.pdf (mca.gov.in) )        I.          Identifying of Contract – Defines a contract and a customer and lays down five mandatory criteria to be met for identification of a contract. Depending on the parties’ local practices; a contract can be oral, written or implied. a.       The parties have approved the contract (whether in writing or orally) and have committed to discharging their respective obligation. b.       Each party’s right in relation to the transfer of good or services are identifiable. c.       The payment terms in relation to the transfer of good and service can be identified. d.       Economic benefit from the contract can be derived by both the parties respectively. e.       An entity may collect the full co...